America's Talking - Episode 67: Gas Prices Rise for Two Straight Weeks, OPEC Expected to Drive Them Higher

Episode Date: October 7, 2022

Join The Center Square's Executive Editor Dan McCaleb & D.C. Bureau Chief Casey Harper as they discuss: Gas Prices Rise for Two Straight Weeks, OPEC Expected to Drive Them Higher. Americans see 'most severe' pay cut in 25 years due to inflation. Poll: 74% are becoming more concerned about inflation. Support this podcast: https://podcasters.spotify.com/pod/show/america-in-focus/support Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Hello, everyone, and welcome to the America in Focus podcast, powered by the Center Square. America in Focus is a production of America's Talking Network. I'm Dan McAulb, executive editor of the Center Square Newswire Service. To support great podcasts like this one, please donate by clicking the link in the show description. Joining me today is Casey Harper, the Center Square's Washington, D.C. Bureau Chief. How are you, Casey? Doing good, Dan. How are you? I'm doing well.

We are recording this podcast on Thursday, October 6, doing it a day early. because I've got to get out of town tomorrow. But inflation continues to rear its ugly head. Gas prices, which is an all-time average high of over $5 a gallon in June, have been steadily declining over the late summer months. That is until a little more than two weeks ago. Now they've been steadily rising again. Today, according to AAA, the average price across America is $387 a gallon.

Are we headed back to $5 gas, Casey? Well, that is the question right now. We're almost certainly headed back to $4 gas pretty soon. A petroleum expert with gas buddy just said that his name is Patrick DeHan. He said that just her OPEC's latest decisions we'll get into will likely drive prices up 15 to 30 cents a gallon. So that right there will be for $4 a gallon. But as you said, it's been steadily rising. So in March 31st of this year, Biden announced that.

he was going to release a million barrels of oil a day from the Strategic Petroleum Reserve. And that, you know, I think that's been a big part of why we have seen gas prices steadily drop from those record highs of $5 per gallon. So they've been dropping, dropping week after week. You know, now, side note, they are still much higher than when he took off his, but they have been steadily dropping. And then two weeks ago, Tuesday, two weeks ago, the Biden administration really touted the gas prices had gone down.

And then the very next day, Wednesday, they went back up for the first time in about two months. And they have continued to rise since then for two weeks. As you pointed out, they're inching closer to $4 a gallon. Now, that had already started. But now Hurricane Ian is going to, you know, has accelerated that. And I think we'll continue to see the effects of that. And now earlier this week, OPEC announced that they're going to cut the production of oil starting November by 2 million barrels a day. Now, you remember I just said that Biden,

you know, lowered prices by releasing them one million a day. So OPEC cutting two million. It's pretty significant. Biden had really pushed OPEC not to do this, but he didn't have the cloud or whatever it was needed to make that happen. But these prior OPEC is going to be cutting back production, and that's probably going to drive prices up. Of course, there's all the questions around leasing and and Biden's efforts to cut oil production domestically, which have made us more reliant on people like OPEC, on groups like OPEC. But that's more a political question.

But I'll just say prices are getting higher. I think we'll continue to see them go higher. The Petroleum Reserve authorization is running out. The petroleum reserve itself is getting lower, but Biden authorized 180 million barrels. But we are almost run through all those. And right about the time that OPEC cuts there, 2 million barrels a day production, the extra 1 million added into the system will end.

So it would actually be a net 3 million barrels a day fewer in the system in, you know, by mid-late November. So I think it'll be really interesting to see what happens there around Thanksgiving and Christmas time. I think gas prices are likely going to increase significantly. Let's talk briefly about the strategic petroleum reserve. That is oil that the U.S. government sets aside for emergency. situations, national disasters, the event of war, of course. We do have Russia fighting a war in

Ukraine after invaded Ukraine in February. Are there concerns? My understanding is that the reserves in the strategic petroleum reserve are like decades-long lows. Is there a concern that you take too much money or too much of the reserves out of there? that it could impact something if there is another war or if there is a huge national disaster? Yeah, I mean, I think Hurricane Ian raised that question even more. It's like, wait a minute, we don't have, the reserves are running low and now we have hurricanes coming. I think that it is a concern, a national security concern. You're right that the reserve levels have hit the lowest in about four decades.

So it is a significant decrease. This isn't just a minor decrease that, you know, a few years have stored up. I mean, this is, you know, four decades. And so I think, you know, the national security concern is real. I think unless we have a really significant national security event, it will probably be fine. But of course, you know, you don't need insurance as long as your house doesn't burn down, right? So it's kind of the equivalent of not really being insured. So as long as everything continues status quo, we should be fine.

But if there is that disaster, if there is some kind of big event, you know, that's, significant. And then the other thing to consider is when they start buying up oil to replenish the petroleum reserve, isn't that going to take more oil out of the market? Right. So if you start buying half a million or a million barrels a day to start replenishing, is it going to just drive gas prices up to the same degree that releasing the oil lower them? And so, you know, but the more cynical answer to that would be yes, but it won't be a mid-term. election year when that happens. Of course, the industry blames President Biden's anti-oil and gas industry policies,

putting more restrictions on production, on new drilling on federal lands, et cetera, for the rise in gas prices. But sticking with higher prices, let's just segue here into inflation, Casey. the Federal Reserve Bank of Dallas issued new data on wages and inflation this week. And it wasn't good news for Americans. That's right, Dan. I know you're gallivanting off to the south of France today, but most Americans, you know, don't have that luxury, the luxury of the executive editor that kind of solidation.

Actually, I'd be going to the south of Texas close, but not. Oh, yeah, yeah, okay. A little warmer, probably. But you're right. Americans are seeing huge prices. I mean, you know, there's a poll. We'll talk about a minute. 74 percent. I'm more concerned about inflation. But they're also seeing the most severe pay cut in 25 years due to inflation. And that's the language coming from the Dallas Federal Reserve Bank. Now, everyone knows about the National Federal Reserve Bank. But there's actually regional Federal Reserve banks around the country. And Dallas is one of those. and they released this report about inflation, how much money workers are making, how inflation

has hurt them. And I'll just read this quote from it. We find that a majority of employed workers, real inflation-adjusted wages, have failed to keep up with inflation in the past year. For these workers, the median decline in real wages is a little more than 8.5%. Taken together, these outcomes appear to be the most severe faced by employed workers over the past 25 years. So when you kind of you take wage increases, go ahead. Yeah, I was going to say that 8.6% number is just startling.

Yes. So essentially the real wage growth, when you compare, you know, pay increases, annual, whatever it is, cost of living increases, annual pay increases, promotions, et cetera. With inflation, the rising costs of everything, they've actually lost 8.6% of their earning power. That's right. That's right. And you might say, well, how many Americans is this? Is this just like a handful who are struggling? Is this people who lost their jobs?

No, it's actually the majority. This is a notable statistic too, is that we crossed the line from more people lost wages than gained wages in the last week. So more people saw their wages decrease, 53.4% of workers in the second quarter saw negative real wage growth because of these, because of prices are growing. So even if you get a 2% raise and groceries go up 13%, you know, when it all adds up, you didn't really get a raise. You got a grocery stipend that wasn't big enough to cover, you know,

the cost of groceries. And so I think to a lot of Americans listening, like, yeah, this is definitely my experience. These numbers are just telling me what I already knew. But, you know, the average median decline in our last 25 years is 6.5% with real wages, typically declining the range of 5.7 to 6.8. But now we're seeing it even higher at the levels, the 8.5% number. So more people are losing wages, and those who are losing wages, it's at a higher rate.

And let's face it, Americans aren't noticing. When you're purchasing power declines, Americans notice. And you covered, there's a new poll out this week that showed that pretty much three out of four, Americans are becoming more concerned about these rising prices and this wage loss. Yeah, that's right. I mean, you know, it's funny, the different government agencies and things, they can give cost of living adjustments, but most Americans don't get that. They just have their hourly wage or their salary, and they might get a, you know,

5% bump or something like that every year. But that, if that 5% bump would not be enough to keep up. And that's a big reason. As you said, 74%, these numbers are from BMO Financial Group. They did this poll with Ipsis, but 74% of Americans say they're becoming increasingly worried about inflation. So 78% pointed to higher grocery bills, 76% pointed to gas prices, which we just talked about. And 76% of Americans said they're making lifestyle changes. That's things like delaying big purchases, like buying a house, they're cutting back on holiday spending.

So this isn't just political talk. This isn't just some ethereal economic theory. This is real world decisions. Every day, people are looking at Christmas presents. They're looking at whether they can take a holiday trip, go visit Grandma or something like that. And people are cutting back on that kind of stuff because prices are so high. And of course, that has larger implications for the U.S. economy as a whole. Of course, there are also concerns about a recession.

We may already be in a recession because we've seen two consecutive quarters of GDP decline, but even those who say we may not be in a recession yet, many of them say a recession is definitely coming. Yeah, that's right. And I mean, when your wages are going down, prices are up, supply chains, you know, struggling, gas prices are going up. It's a bad time to be going into recession. Of course, some of these things are caused by, you know, the head towards a recession or already being in a recession. Actually, you know, this next round of GDP data will be really interesting because the certain experts in the Biden administration was able to somewhat shrug off two consecutive quarters of GDP loss. But if we have a third, I think it will be really difficult

for them to continue to evade that label of recession, which, you know, has effects on things like consumer confidence. If we get that official label of recession, these people who are not wanting to buy a house now are definitely, you know, are going to be even more discouraged from buying a house, not to mention mortgage, mortgage interest rates have really hiked up. I mean, I know people are wanting to buy a house, but now they can't because the mortgage interest rates are so much higher. The demand for new mortgages has really plummeted. So all these are all this data markers, and they can kind of make your eyes glaze over a little bit, but they have real world impact for people. And they start to add up when it's across every sector. And it's hitting so many

areas of people's lives. But now that it is October, of course, We are into the fourth quarter of the calendar year. So three third quarter GDP data should be coming out fairly soon, yes? Yeah, I believe it's near the end of this month. All right, sticking with inflation, but bringing in the November midterm elections. Another poll out this week said the price of groceries and the higher prices of groceries and other consumer products. will affect their November vote. Tell us about this. Yeah, this is coming down to the wire on the November elections.

And gas prices starting to go up right now. It's pretty bad timing for midterm Democrats who've benefited from those prices decreasing in recent months. But Convention of State's Action, along with your fall group, found that 68.3% of surveyed voters say the hike in grocery prices is impacting their motivation to vote this November. So, of course, more Republicans agreed with that and fewer Democrats, but it's worth pointing out that 64.1% of independents say the same. So independents are often the, you know, ever sought after swing vote in so many of these elections. And, you know, well over 60% have grocery prices, top of mind when making these decisions. And just to put some hard numbers on grocery prices

and the Commerce Department releases data on this stuff. And the Food at Home Index, has increased 13.5%. Certain foods like cereals and bakery products have gone up almost 17%. So you're going to buy your kid's cereal. It's 17% more expensive. Fruits and vegetables are over 9% more expensive. You're going to buy milk, it's going to be over 16% more expensive. And that's just in the last year.

It actually was already rising before that. If we took into account the last 18 months, these numbers would be a lot higher, actually. But this data is just from the last year. So this is all adding up, Dan. I don't know if you are hearing people talk about this. I mean, Illinois is definitely a left-leaning state. It might be hard to imagine that certain areas would actually flip red, but I'm not sure this is something they're talking about there,

or if you've heard that. Well, you know, Illinois is traditionally considered a blue state, but Illinois is really divided. You've got Chicago, you know, where the vast majority of people live, where the most people, Chicago and the suburbs. But downstate, it's far more conservative. So there are going to be congressional districts in Illinois where this could impact it, be impactful.

And on November 8th, Americans will decide who controls Congress and the U.S. Senate. The U.S. Senate is currently 50-50 tied between Democrats or those who caucus with Democrats and Republicans. So Democratic Vice President Kamala Harris holds the tie-breaking vote, Republicans just need to pick up a net of one U.S. Senate seat to regain control of the Senate. And Democrats have a slight majority in the U.S. House. I don't have the number in front of me, but Republicans just need to flip a handful of seats there to regain control of the House. So this is a very important election, particularly for President Biden and his policies, what he wants to do moving forward.

Yeah, and this is the probably overused phrase of kitchen table issues. You know, when you talk about certain political issues, they can feel kind of philosophical, big government or small government, you know, illegal immigration, even that, unless you have, legal immigrants in your backyard or something, it's kind of a faraway issue, but there are certain issues like gas prices or grocery prices that affect everyone, literally everyone. and so it's impossible to avoid. And, you know, the degree to which this can actually be, is, you know, Democrats and Biden's fault. It's not 100%.

I think it is some definitely can very honestly put a significant part of the blame on some of the things Biden has done. But I say, I'll have to say that the incumbent party takes the blame for things when they're bad. So Trump, you know, took the blame for COVID. And that is very likely. I think the reason that Trump did not win reelection was because, COVID was so rampant and did so much damage to the economy and he was incumbent and so he lost. And so some of these things, you know, you say, oh, this is OPEC's fault. It's not Biden. That's an argument that can be made. But politically, whoever's in charge takes the blame for what's

going on. And I think we're in real, you know, likelihood going to see Democrats take the blame for a lot of these higher prices unless something really different happens in the next few weeks. Let's stick with food, Casey, but the transition from inflation, more than 100 lawmakers sent a letter to the state's top, or to the country's top federal watchdog, raising concerns about foreign ownership of U.S. farmland. What's going on here? Yeah, this is a really interesting story. There's been a lot of stories lately about people like, even like Bill Gates, buying up U.S. farmland. There's been coverage about U.S. food infrastructure, in part because food prices are higher. But just, and I think the supply chain recently has shown, while we're actually really

dependent on other parts of the world for some really important things like, you know, antibiotics, I believe we're significantly reliant on China, for example, for antibiotics. And so there's been a lot of look recently at our supply chain. If some kind of conflict broke out, are we going to be without antibiotics if China invades Taiwan? Those are things people are thinking about. And this is along that vein. So the top federal watchdog in question is the government accountability office. And these lawmakers sent them a letter.

And they want a full review of the foreign ownership of U.S. farmland, which is actually significantly increased in recent years, how this can impact national security, our food security. And really just what the federal government is doing if they're doing anything at all. So the U.S. Department of Agriculture, they really stayed on this. And they said that the foreign investment in agricultural land in the U.S. has actually doubled from just 2010 to 2020. Now, it's still, yeah, it's really interesting. It's still a relatively small percentage. So currently foreign ownership of U.S. land is 2.9% of all privately held agricultural land. and it's 1.7% of all land in the U.S.

but even that, that's pretty amazing that foreign governments own 2% of U.S. land. I mean, that is not a, not a small number. It's 37.6 million acres. And so this is something. Go ahead. That's a lot of land. Yeah, it is. And, you know, when you compare it to how much land, you know, large U.S. company zone,

it's, you know, so many U.S. companies can't even compete with that kind of thing. prices are going up. It makes you wonder how much foreign entities, especially ones that might be considered rivals, could impact our food supply, could drive prices up higher. I mean, this is a national security issue, isn't it? Yeah, I think so. I think so. I mean, there's always the potential of something like sabotage, but it's definitely an economic threat. But if we ever came into some kind of conflict, and I think people kind of just think that kind of thing can never happen. But for example, I mean, there's a real possibility that China invades Taiwan.

And from what Biden has said, we're going to somehow get involved in that conflict, which is going to have huge economic consequences. I don't know, there'll be cyber attacks. There may a lot of things going on. And that's the other thing. A lot of our infrastructure is vulnerable to cyber attacks. You think, oh, were they going to bomb a cornfield? It's like, well, they can, you know, cyber attack the water infrastructure so that the crops can't be irrigated.

You know, I mean, there's more thoughtful ways to handle this. And China is one of the countries that has vastly increased its investments in U.S. farmland. That's right. Yeah, China is one of those top ones. So it does, it's like, wait a minute, China can buy. I think some people would say, I didn't even know that China could do that. We're just letting, we're letting this happen.

And so far, there hasn't been a huge consequence. But, you know, I think when you see China's practices in other countries, they're extremely predatory. in their investment. So they'll go into poor countries and they will offer to do things for them invest or they'll say, hey, we'll build internet for you in these remote areas.

But then China builds the internet, but now they build it in such a way that they can forever monitor it and spy on the country they built it for. So China has, or they give these really bad loans to poor countries. So they have a history of doing predatory investment, which just shows that China views investment,

It's a geopolitical strategy, maybe more than economic strategy. And we just need to be aware of that and know that, hey, we need to keep an eye on this. And I think that's what these lawmakers are doing. And I think several weeks ago we talked about China buying U.S. land that are even near military bases. That's obviously another concern. So a story that we should be continuing to follow and look into. Time for one more story. Casey. We've talked in the past about President Biden's plan to increase internal revenue service IRS auditors by as many as something like 87,000 agents. That's additional to the auditors that they already have on board. This week, U.S. Senator from Kansas filed legislation. The concern there, of course, by small businesses and all Americans is that these 87,000 new auditors are going to go on witch hunts looking for what they consider to be tax.

tax cheats. The U.S. Senator from Kansas, Roger Marshall, was introduced to legislation that would give Americans an opportunity to fight back against that. Tell us about this. Yeah, that's right. And there's also just questions about what are the incentives going to be in place for these agents? I mean, you can imagine if an IRS auditor doesn't audit anyone, he's probably, you know, it's not going to be a good year for him. I mean, he's got to pull in some results, pulling some money. But if you add tens of thousands of more, are they going to be scraping the bottom of the barrel or even pressured to find something where nothing is there?

An analogous example would be imagine if your hometown hired, you know, 5,000 more police officers and all said that they had to issue, you know, 10 speeding tickets a day. Well, all of a sudden, you might be getting a lot more speeding tickets for going 56 and a 55 or maybe, you know, for doing nothing at all. So that's the kind of thing that people worried about. But Senator Roger Marshall from Kansas, he introduced this bill. It's called Preventing Frivolous Act by the IRS Agents Act. Now, in a certain way, of course, there's already laws against agents doing something illegal. But this is targeted at trying to keep them from going after things that are just kind of silly. The word they use here is frivolous.

But I think Americans' bigger concern is basically. based on what we've seen in recent years, and we've talked about this on the podcast, we're like the lowest learner scandal, where conservatives were clearly targeted by the IRS using certain keywords. And that was during the Obama administration. This isn't some ancient scandal. We've seen, you know, in modern, recent, modern politics, IRS agents go after conservative groups.

And you have to think that the federal bureaucracies animus against conservatism has only increased, not decreased. Our nations only become more divided since them, not less divided. We've seen other agencies do some really questionable things like the FBI, do some really controversial raids and things and even let certain Democrats off with things while going after certain Republicans. And so I think there's already, we've seen in the polling, an erosion in the trust of federal law enforcement.

But that carries over to the IRS, which also has like a real law enforcement-like power. So, you know, this lawmaker is trying to do something to bring attention to it, to ran it in. But ultimately, I think it's going to take something like what Kevin McCarthy proposed, which is a total repeal of these 87,000, if Republicans take the majority. You know, he said we're going to just undo what Biden did. But whether Republicans can get that kind of majority in the next few years remains to be seen. Certainly any effort to a repeal, even if Republicans do take control of both the U.S. House and the U.S. Senate, they won't have veto-proof majorities, and President Biden likely will veto any side.

attempt for each of appeal. Well, as usual, Casey, thank you for your insight into these very important issues. But that's all the time we have this week. A reminder to our listeners, you can find all of the Center Squares podcast at America's Talking.com. Take a look. Please subscribe. There is no cost. This has been the America and Focus podcast for Casey Harper. I'm Dan McKeelab. We'll talk to you next week.