A large increase in the world price of oil is an example of a supply shock. A supply shock is an event that directly affects firms’ costs of production and thus the prices they charge; it shifts the economy’s aggregate supply curve…For example, when an oil price increase raises the cost of producing gasoline, heating oil, tires, and many other products, it reduces the quantity of goods and services supplied at any given price level. As panel (a) of Figure 8 shows, this reduction in supply is represented by the leftward shift in the aggregate-supply curve from AS1 to AS2. Output falls from Y1 to Y2, and the price level rises from P1 to P2.
Clearly, then, supply shocks are not good. So it beggars belief that the Biden administration has just imposed one on the American economy.
The Biden administration is canceling seven Alaskan oil and gas leases issued by the Trump administration, it said Wednesday.
The Department of Interior put the leases, located on 365,000 acres in the Coastal Plain region, on hold in June 2021.
In addition to that:
The DOI also proposes new regulations for the National Petroleum Reserve in Alaska that could limit oil and gas leases in the area. A 60-day comment period will open after it is published in the National Register, the department said.
True, by now it would be foolish to expect sensible economic policy from this administration. But you may still be surprised to see that Democrats actually applauded President Biden for taking an action that will both harm Americans and strengthen the likes of Vladimir Putin. Nevertheless, that is just what they did:
I won’t offer a punchline. This speaks for itself.