On the menu today: Happy Valentine’s Day. If you’ve forgotten flowers for your loved one, grocery stores usually have a decent selection at not outrageous prices. Or if you really want to show your special someone that they’re worth more to you than any fortune, buy her some eggs. Prices at the grocery store and the gas pump are the focus of today’s newsletter, as this is the one area where polling indicates some public discontent with the still-new Trump second term. Elsewhere, the president tells us whom he trusts.
Keep an Eye on Inflation, Groceries, and Gas Prices
Republicans are riding high, and you can’t blame them. The Democratic National Committee senses its followers are so dispirited that they now post on X a “what we did today” update. Thursday’s edition boasted that every Senate Democrat voted against Robert F. Kennedy Jr. to be the next secretary of health and human services (he was confirmed anyway), Congresswoman Pramila Jayapal of Washington introduced an amendment to the U.S. Constitution that would reverse Citizens United (it’s not going anywhere), and “Arizona Democrats passed legislation to provide funding for free school lunches in the state.” Arizona already has a program aimed at students from low-income families, and what the DNC meant is that a bill to allocate $3.8 million for this program passed out of the Arizona House Appropriations Committee by a vote of 16 to 2. They’re taking a victory lap on legislation supported by a broad bipartisan majority. Whenever a minority party boasts about a big win in a legislative chamber controlled by the opposition, look closer.
But that CBS News/YouGov poll from this weekend that was chock full of good news for President Trump included one ominous rattle in the engine: Two-thirds of U.S. adults said Trump’s focus on lowering prices is “not enough,” 31 percent said the “right amount,” and only 3 percent said “too much.”
Trump defenders will accurately argue that it’s unreasonable to expect to see immediate effects of his economic policies; he has only been in office for 26 days. The CBS poll noted that “those who today expect his policies to lower prices don’t expect it to happen overnight. Many of them think it’ll take at least six months.”
Then again, Trump himself promised quick action; at his rally in Coachella on October 13, he pledged, “I will very quickly deflate . . . We are going to take inflation, and we are going to deflate it. We are going to deflate inflation. We are going to defeat inflation. We’re going to knock the hell out of inflation. We’re going to use a thing that we have more of than anybody else, it’s called liquid gold, oil and gas. And we’re going to make America affordable again.”
And in those 26 days, Trump’s done an awful lot. (Notice that despite the hurricane of presidential activity since taking office, Trump has signed just one piece of legislation into law, the Laken Riley Act.)
There may well be a consequence to the Trump administration’s flood-the-zone strategy of new executive orders, actions, tariffs, and his usual provocative statements, day after day. If voters are focused on the cost of living the most, they may not be all that thrilled to hear Trump talking about annexing Canada or Greenland, or taking over Gaza and redeveloping it, or his skepticism that Mitch McConnell ever suffered from polio, or his big plans now that he’s been unanimously elected chairman of the board of the prestigious Kennedy Center. (Trump’s proposal to discontinue the penny could be seen as an acknowledgement that the inflation of recent years has made pennies obsolete.)
The latest report on inflation is . . . as they said in the miniseries Chernobyl, “not great, not terrible.” The Consumer Price Index is up 3 percent over the past twelve months, which is below the bad days of 2021 and 2022 but stubbornly above the Federal Reserve’s 2 percent target and a bit higher than the 2.4 percent of October. (And if the hailstorm of tariffs coming from this administration are going to have an inflationary effect, you really want that number to be as low as possible before you start.)
The rate of increase from the end of December to the end of January was similarly not great. The U.S. Bureau of Labor Statistics summarized:
The index for shelter rose 0.4 percent in January, accounting for nearly 30 percent of the monthly all items increase. The energy index rose 1.1 percent over the month, as the gasoline index increased 1.8 percent. The index for food also increased in January, rising 0.4 percent as the index for food at home rose 0.5 percent and the index for food away from home increased 0.2 percent.
Trump responded to Wednesday’s inflation numbers with Truth Social post, “BIDEN INFLATION UP!” For the first 20 days, maybe that will work, but as noted above, voters expect to see some results within a half a year or so.
If people are talking about high prices, the topic is likely to turn to eggs. According to figures from the U.S. Department of Agriculture, egg prices reached an all-time high of $7.86 for a dozen this month, and the price has increased 32.2 percent since the beginning of the year. As noted last week, this is largely because of bird flu, although there’s also a fair question of whether well-meaning USDA policies aiming to minimize the costs of a bird flu outbreak in a flock created a moral hazard and made poultry farmers too casual about the risks of an outbreak, and disincentivized taking precautions to minimize the risk of infections spreading.
Eggs go into everything — breads, pasta, cakes, cookies, custard, mayonnaise, battered and breaded foods, marshmallows, sometimes meatloaf and meatballs. So, when the price of eggs goes up, the price of everything that’s made with eggs goes up, too.
Then there’s gasoline prices — averaging $3.12 per gallon last week, and that’s including all formulations at retail prices, according to the Energy Information Administration. (This morning, the American Automobile Association has it at $3.16. Whenever I write about the national average price of gas, someone in the comments section insists that figure is false nonsense because they paid something much higher or much lower this past week. Yes, that’s what a national average is; prices in your particular neck of the woods may be much higher or lower. In California, the average is $4.82; in Mississippi, the average is $2.68.)
That’s a bit less than a year ago at $3.19, but in February 2020, just before the pandemic, gas was $2.41. The year before that, it was $2.27. Gas prices traditionally go up in spring and summer, so I suspect you’ll be seeing more coverage of rising gasoline prices.
Remember, next month we may implement a 10 percent tariff on Canadian oil and a 25 percent across-the-board tariff on Mexico, which would apply to their crude oil exports to us. According to the Congressional Research Service, “during calendar year 2023, U.S. refineries imported approximately 6.5 million barrels per day (BPD) of crude oil, which is currently subject to tariffs. Canada and Mexico supplied more than 71 percent of U.S. crude oil imports, with nearly 60 percent of U.S. crude oil imports from Canada alone.” But the threat of tariffs are, at least so far, not impacting gas prices; more on this in a bit.
On Wednesday, Newsweek ran the headline, “Gas Prices Are Soaring Again Under Trump,” but the first sentence declares, “gas prices are set to ‘soar’ in parts of the country,” a shift from referring to current conditions to future conditions. The article’s source for this is Patrick De Haan, head of petroleum analysis at GasBuddy, who declared, “West Coast gas prices (CA, AZ, Las Vegas, some of NV) will soar in the next couple weeks due to refinery issues and change to summer gas.”
At the start of February, the Martinez Refinery Company in Martinez, Calif., had a serious fire that shut down almost all operations until further notice. That facility had a capacity of 157,000 barrels per day. This plant is roughly 9.6 percent of California’s refinery capacity.
You may recall my futile cries to the heavens that if Americans want lower and more stable gasoline prices, we desperately need to expand our oil refinery capacity. “Drill, baby, drill” is fine, but we can’t get it to work in our cars unless we “refine, baby, refine.” Alas, in California, laws are heading in the other direction:
On October 14, California Governor Gavin Newsom signed bill Abx2-1 into law, empowering California regulators to set and adjust minimum petroleum product inventory levels for refiners in the state, in part to address the state’s fuel price volatility. Shortly after, refiner Phillips 66 announced plans to close its Wilmington refinery in Los Angeles by the end of 2025, citing uncertainty surrounding the long-term sustainability of the refinery.
De Haan also said Wednesday, “Potential tariffs are *not* having an impact just yet, but if they do, I will be the first to share that info. I have no problem calling out either party and it bothers me when people in positions to be quoted either don’t know or outright misinform.”
We’re a long way from the midterm elections, or even this year’s gubernatorial elections. But inflation and the cost of living amounted to a dagger into the heart of Joe Biden’s hopes for a second term. There’s nothing inherently wrong with having an ambitious and wide-ranging policy agenda, but Trump and his team ought to be particularly careful that Americans believe they’re making this issue a top priority.
ADDENDUM: I think the talk about Donald Trump being a stooge or pawn of Vladimir Putin is wildly overblown, but when the president runs around making statements like this one in the Oval Office yesterday, there’s nothing anyone can do to help him.
Q: On Ukraine, when Putin says that he really wants peace, do you believe him?
Trump. Yeah, I do. I believe he wants peace. I believe that President Putin, when I spoke to him yesterday — I mean, I know him very well. Yeah, I think he wants peace. I think he would tell me if he didn’t.
Q: Do you trust President Putin?
Trump: I believe that, yeah. He would like to see something happen. I trust him on this subject. I think he’d like to see something happen.
Mmm, because KGB colonels are legendary known for their honesty and trustworthiness!
If you don’t want your critics to call you a gullible sucker . . . stop going before the cameras and sounding like a gullible sucker.