The Morning Dispatch: Pain at the Pump

Happy Thursday! People Magazine on Wednesday named Paul Rudd this year’s Sexiest Man Alive. Jonah Goldberg, robbed yet again!

Quick Hits: Today’s Top Stories

• The consumer price index—a key measure of inflation—increased 6.2 percent year-over-year in October according to the Bureau of Labor Statistics, the fastest rate of annual growth since 1990. The Dow Jones Industrial Average dropped 240 points yesterday as investors projected sustained inflation will lead the Federal Reserve to hike interest rates earlier than expected.

• White House COVID-19 response coordinator Jeff Zients said yesterday that approximately 900,000 children ages 5 through 11 have received their first vaccine dose since it was authorized by U.S. health regulators last week. 

• U.S. District Judge Judith Levy on Wednesday approved a $626 million deal to settle a series of lawsuits stemming from the Flint water crisis. Once legal fees are paid, the bulk of the money will go toward children who were exposed to the lead-contaminated water.

Problems at the Pump

You likely didn’t need the Bureau of Labor Statistics (BLS) to tell you that consumer prices are continuing to rise, but on Wednesday, its monthly inflation update removed all doubt: The consumer price index (CPI) increased 0.9 percent in October, and a whopping 6.2 percent over the past 12 months. Besides Steve, none of your Morning Dispatchers were alive in 1990, the last time the annual figure was that high.

It’s not just a few spending categories driving these alarming figures, either—prices are up more or less across the board. The BLS calculated the cost of food, for example, to have risen 5.3 percent year-over-year, and appliances are up 6 percent. New cars and trucks are 9.9 percent pricier than they were last October, and furniture and bedding is up 12 percent. Each of these cost increases is well above historical averages, but none of them compare to what’s happening at the gas pump, where prices are up an astronomical 49.6 percent over the past 12 months.

According to GasBuddy—a company that tracks gas price information at more than 150,000 stations across the United States and Canada—the average price of regular gas in the United States has risen from about $2.20 per gallon at the beginning of 2021 to $3.42 per gallon this week. The last time it cost that much to fill up a tank, the original Guardians of the Galaxy was the No. 1 movie in the country.

President Biden acknowledged the reality in a speech at the Port of Baltimore on Wednesday. “Today’s economic reports showing unemployment continuing to fall, but consumer prices remain too high,” he said. “Everything from a gallon of gas to loaf of bread costs more. And it’s worrisome, even though wages are going up.”

“Did you ever think you’d be paying this much for a gallon of gas?” he asked the crowd later. “In some parts of California, they’re paying $4.50 a gallon!”

This isn’t news to Republicans, who for months have been attempting to pin the increases on Biden and his administration’s policies. “On his very first day in office, the president killed the Keystone XL Pipeline and 11,000 American jobs with the stroke of a pen,” GOP Sen. John Barrasso wrote in a July op-ed. “The next week he ‘temporarily paused’ new federal oil, gas and coal leases.”

Those decisions, down the line, could very well lead to both increased freight costs transporting crude oil from Canada and a reduction of global oil supply by limiting U.S. production. But neither is playing a significant role in the current gas price surge, which, like so many other things, can mostly be traced back to the pandemic.

“If COVID wouldn’t have happened, we would not be at $3.42 a gallon today,” Patrick De Haan—head of petroleum analysis at GasBuddy—told The Dispatch. “For the simple reason that oil companies would not have had to let go workers and shut down oil production.”

When the world locked down in the spring of last year, the demand for oil and gas plummeted almost overnight, and—for a variety of reasons having to do with geopolitics and how crude oil is produced—it took a while for supply to adjust. The result? An unprecedented glut, with producers unable to find buyers for their oil and running out of storage space. For a brief period in late-April 2020, prices even went negative: Producers were paying buyers just to take excess oil off their hands.

To stabilize prices, the Organization of the Petroleum Exporting Countries and its allies (known as OPEC+) reached an agreement that month to cut crude oil production by a record amount. The global glut amassed in early 2020 lasted through the rest of that year, but was nearly depleted by February 2021.​​ Even as coronavirus restrictions were lifted, OPEC+—which consists of 23 nations and is led by Russia and Saudi Arabia—has been slow to increase supply.

The situation has Biden in a bind, as he faces conflicting political pressures  both to combat rising costs for consumers and lead the world away from fossil fuels. His administration’s strategy, dating back months, appears to be pressuring OPEC+ into upping its crude oil production in the short-term—and blaming those countries for domestic gas price increases—while continuing to promote the transition to clean energy in the medium- to long-term.

“If you take a look at gas prices and you take a look at oil prices, that is a consequence of, thus far, the refusal of Russia or the OPEC nations to pump more oil,” Biden said from the United Nations Climate Change Conference last week.

Isn’t that a contradiction, to be promoting oil drilling at a climate change symposium? “Well, on the surface, it seems like an irony,” Biden admitted. “But the truth of the matter is—you’ve all known; everyone knows—that the idea we’re going to be able to move to renewable energy overnight and … from this moment on, not use oil, or not use gas, or not use hydrogen, is just not rational.”

OPEC+ meets monthly to make decisions on production levels, and it has repeatedly neglected to accede to the Biden administration’s demands, likely concerned such a move would send prices tumbling again. Last week, it again refused to deviate from its more gradual buildup of an additional 400,000 barrels per day.

Biden seemed over the weekend to admit defeat in achieving a different outcome. “I’m not anticipating that OPEC would respond, that Russia and/or Saudi Arabia would respond,” he said, hinting that there are “other tools in the arsenal” to deal with gas prices. “They’re going to pump some more oil. Whether they pump enough oil is a different thing.”

On Monday, 11 Senate Democrats wrote a letter to the president outlining some of these “other tools” in the arsenal. “In our home states, high gasoline prices have placed an undue burden on families and small businesses trying to make ends meet,” the letter reads. “We ask that you consider all tools available at your disposal to lower U.S. gasoline prices. This includes a release from the Strategic Petroleum Reserve and a ban on crude oil exports.”

Established in the 1970s, the strategic petroleum reserve (SPR) is a collection of four underground storage areas along the Gulf of Mexico in Texas and Louisiana that, collectively, can hold about 730 million barrels of oil. There are currently about 610 million in the reserve, and Energy Secretary Jennifer Granholm told CNN over the weekend that Biden is “looking at” tapping into the stockpile.

De Haan told The Dispatch that any short-term solutions the Biden administration can implement right now—like temporarily suspending the gas tax or releasing some of SPR—is like trying to patch someone up with a band-aid after open-heart surgery.

“It would do something, but it would be short-term and temporary,” he said. “The more oil the president releases from the SPR, should he do that, the more of an impact it would have. But it would still be temporary. The thing is, that’s a pool of oil, and once it’s gone, it’s gone.”

Noticeably absent from the administration’s response, at least publicly, has been a focus on boosting domestic oil production, which—like OPEC—remains well below pre-pandemic levels. The United States became a net exporter of crude oil and petroleum products in 2019 for the first time since the mid-20th century—and remained so through the first half of 2021—but overall U.S. production remains about 1.5 million barrels per day below February 2020 levels. Some of this can be attributed to Hurricane Ida disruptions in the Gulf of Mexico, but far from all of it. 

Asked on Bloomberg TV this week for the administration’s plan to boost American output, Granholm threw her head back and laughed. “That is hilarious. Would that I have the magic wand on this,” she said. “Here is the Biden plan. I’m here in Glasgow, the Biden plan is to diversify and to make sure that we move in a direction of clean energy where we’re not reliant upon cartels and we’re not reliant upon geopolitical adversaries. … If $80-plus a barrel doesn’t incentivize oil companies to get off the sidelines, I’m not sure what will.”

Granholm’s answer was flippant, but De Haan said there’s not really all that much else the administration can do in the immediate term. “Everyone’s thinking [Biden] has this big lever in the White House, high and low oil prices, and he just switches it from one to another,” he said. “But it’s much more complex than that. He doesn’t have a lot of really good cards right now to play.”

Durham Exposes Steele Dossier’s Flimsiness

You’ve probably heard of the Steele dossier. The multipart report detailing former President Donald Trump’s alleged ties to Russian government officials captured global attention when, in 2017, Buzzfeed News published its text in full after failing to independently corroborate its various allegations. The series of memos inspired sensational, award-winning reporting for months into the Trump presidency. Before that, and behind closed doors, the documents justified the FBI’s Foreign Intelligence Surveillance Act (FISA) applications to tap the phone of former Trump campaign adviser Carter Page during the 2016 presidential race.

Lesser known to the public is Igor Danchenko, the dossier’s “primary sub-source” and target of a recently unsealed Justice Department indictment. Like Michael Sussman, a lawyer hired by the Clinton campaign in 2016 to research the Trump Organization, Danchenko is in the crosshairs of a two and a half-year investigation by special counsel John Durham for allegedly making intentionally misleading statements to FBI agents. 

On Wednesday, Danchenko—a Russian national and former Brookings Institution expert—pleaded not guilty during his arraignment in the U.S. District Court for the Eastern District of Virginia. A federal judge set Danchenko’s preliminary trial date for April 18, 2022, and set bond at $150,000. While Danchenko is charged with several counts of lying to federal investigators and not for acting as the primary sub-source in Christopher Steele’s now-infamous opposition research project, several of the details outlined in the indictment shed damaging light on the dossier’s specific claims and their subsequent mobilization by media outlets and federal agents.

In July 2016, the FBI launched a probe known as “Crossfire Hurricane,” which, following a tip from the Australian government, examined possible links between Trump, the Trump Organization, and Moscow. A month earlier, the Clinton campaign had hired, via the law firm Perkins Coie, an opposition research company called Fusion GPS. Fusion GPS then contracted ex-British spy Christopher Steele and his U.K.-based firm to dig into Trump and the Trump Organization.

But contrary to subsequent statements by the former president and some in the media, the investigation was not opened because of the Steele dossier, as the reports had not yet been passed onto federal agents. The dossier did, however, serve as the basis for “intrusive” surveillance targeting Page, according to the indictment. 

In April 2019, Attorney General Bill Barr selected Durham to investigate the origins of Crossfire Hurricane. Because of Durham’s appointment by the Trump administration, his ongoing inquiry has been treated with a healthy dose of scrutiny, but has thus far turned up details similar to those uncovered in previous investigations through its three indictments. 

A March 2019 report by special prosecutor Robert Mueller—which ultimately yielded 37 indictments and seven guilty pleas or convictions—failed to corroborate the dossier’s specific allegations and fell short of unearthing a wholesale conspiracy to collude by accepting foreign help. And a December 2019 report by Justice Department Inspector General Michael Horowitz detailed at least 17 errors, inconsistencies, and omissions in the FBI’s applications for FISA warrants to wiretap Page.

The latest indictment lays bare the various defects in Steele’s sourcing, which contributed to the bureau’s early blunders. Danchenko told investigators that his information was from well-connected sources, namely Sergei Millian, former president of the Russian-American Chamber of Commerce—an alleged lie that he repeated four times to FBI agents, resulting in four of his five counts. 

The accused “did willfully and knowingly make a materially false, fictitious, and fraudulent statement or representation in a matter before the jurisdiction of the executive branch of the Government of the United States,” the indictment reads, “that he received a late July 2016 telephone call from an individual who Danchenko believed was ‘probably’ [Millian].” 

The remaining count of lying to FBI agents pertains to Danchenko’s statements about longtime Clinton ally Charles H. Dolan Jr., who, throughout 2016, maintained regular contact with both Steele and Danchenko. Identified in the indictment as “PR Executive-1,” Dolan had “historical and ongoing involvement in Democratic politics, which bore upon [his] reliability, motivations, and potential bias as a source of information.” According to the indictment, many of the allegations that Danchenko passed onto Steele and would later appear in the dossier “mirrored and/or reflected information that [Dolan] himself also had received through his own interactions with Russian nationals.” Danchenko would later deny that Dolan served as an informant for at least one assertion contained in the dossier.

“The defendant denied to agents of the FBI that he had spoken with [Dolan] about any material contained in the [Steele dossier], when in truth and in fact, and as the defendant well knew,” Durham wrote, “[Dolan] was the source for an allegation contained in a [dossier memo] dated August 22, 2016 and was otherwise involved in the events and information described in the reports.”

Worth Your Time

• The economy is in a weird place right now. The unemployment rate is 4.6 percent and falling and Americans have more money saved up than ever before, but inflation is roaring and consumer confidence is plummeting. In his latest Bloomberg column, economist Tyler Cowen argues it makes sense to be a little pessimistic in the short-term. “Even if they don’t understand the exact economic logic here, most Americans grasp the common-sense truth that inflation and deficits are bad—for them, for their real wages, and for their future opportunities,” he writes. “They are happy to have higher savings in the bank, but they see the treadmill turning ever faster.”

• Rep. Liz Cheney delivered the keynote address at a First Amendment Award Celebration in New Hampshire earlier this week, and, if you have a few minutes, you should definitely listen to it. “In the months since January 6, I have sometimes heard people say something like, ‘Well, what happened was bad. But it wasn’t that big a deal because our institutions held,’” she said. “To those people, I say our institutions do not defend themselves. We the people defend them. Our institutions held on January 6 because there were brave men and women—elected officials at every level of our government—who did their duty, who stood up for what was right, who resisted pressure to do otherwise. And our institutions held because of the bravery of the men and women in law enforcement and in our military. … That is why our institutions held. Because men and women of courage and honor recognized one of the most fundamental principles in a republic: And that is the principle that no citizen in a republic is a bystander. No one is. Every one of us is called to defend this great experiment, government of, by, and for the people.”

Presented Without Comment: Blast From the Past

Also Presented Without Comment

Toeing the Company Line

• On Wednesday’s Dispatch Podcast, Sarah, Steve, David, and Chris Stirewalt discuss continued global supply chain issues, the politics of the bipartisan infrastructure package, and the latest news surrounding the Steele dossier. Plus: A look ahead at the 2022 midterm elections.

• In this week’s Capitolism (🔒), Scott Lincicome revisits the current supply chain situation and assesses whether the Biden administration is improving or worsening the situation. “Policies that prioritize and protect narrow political interests over broader, national ones surely didn’t cause the supply chain crisis, but they just as surely exacerbated the situation,” he writes. 

• After a few thoughts on House Republicans and the bipartisan infrastructure deal, Jonah steers Wednesday’s G-File (🔒) to a discussion of Paxlovid and the end of the pandemic. “It’s time to treat COVID like other corona and flu viruses: something people should try to avoid getting, but not something that fundamentally changes how we live.”

Let Us Know

It’s Veterans Day, and we at The Dispatch want to express our utmost gratitude and appreciation to those who have answered the call to serve. In the comments, let us know of a veteran that you’re honoring today and what his or her service means to you.

Reporting by Declan Garvey (@declanpgarvey), Andrew Egger (@EggerDC), Charlotte Lawson (@lawsonreports), Audrey Fahlberg (@AudreyFahlberg), Ryan Brown (@RyanP_Brown), Harvest Prude (@HarvestPrude), and Steve Hayes (@stephenfhayes).