What Freedom Costs When Government Sets Prices - with Bob McEwen

Gas prices spike and the first instinct is to blame “greedy oil companies,” but that explanation falls apart once you follow the math of a global commodities market. We sit down with former Congressman Bob McEwen to untangle a listener’s question: if America has so much oil, why do Americans still feel the pain at the pump? The answer runs straight through supply and demand, worldwide buyers, disruptions in major producers, and the reality that prices are signals, not slogans.

From there, we take on the loaded term “price gouging” with a simple example that hits home: what happens to a business when replacement costs jump overnight? That retail logic applies to oil too, and it exposes why a snapshot of “profit” can be misleading when tomorrow’s inventory costs more than yesterday’s. We also talk about government price caps, why socialist-style price controls create shortages and empty shelves, and how political promises to “set the price” usually end by breaking the incentives needed to produce, refine, and deliver energy.

We wrap by digging into futures markets, the risk entrepreneurs take to stabilize pricing, and the constitutional idea of limited government as a servant of the people, not a manager of every decision. Finally, we connect economic freedom to a deeper foundation: liberty works best when a society has shared moral restraints, because without them the pressure for more government control only grows. If you found this helpful, subscribe, share the episode, and leave a review, then tell us what you think: where should the line be between smart regulation and harmful micromanagement?

Transcript

Rick Green [00:00:07] Welcome to the Intersection of Faith and Culture. It's The WallBuilders Show. Thanks for joining us today here at the intersection of faith and culture and the place where we answer questions with a biblical, historical, and constitutional perspective. And thank you to all of you that send in questions for our Foundations of Freedom Thursday program. We're going to answer some of those questions today actually, even though it's not Thursday yet, but you'll have to tune in again on Thursday for additional questions. Please send those to radio@wallbuilders.com, radio@wallbuilders.com, and then check out that website at wallbuilders.com lots of great materials and resources for you there. And then wallbuilders.show if you need to catch up on any of the radio programs, you might have missed over the last few weeks. Rick Green here with David Barton and Tim Barton. Bob McEwen joining us a little later. We got some great questions. We're gonna be asking him. It's kind of our phone a friend, right guys? Like when we get to one on economics, we say, Regis, can we phone a friend? And I know that's an old show now. That used to be like the hip show. Who Wants to be a Millionaire? Y'all remember that one?

Tim Barton [00:00:59] I do. It's been a hot minute.

Rick Green [00:01:00] Yeah, guys, so when it's time to phone a friend on an economic question. We all three have the same speed dial in our phones and it's Bob McEwen. So when we get a tough question, Bob, Bob McEwen joining us. Hey, thanks for joining us and helping us answer some good questions today, man.

Bob McEwen [00:01:14] Honored to be with you.

Rick Green [00:01:15] Well, we got we got a lot we'd love to throw your way. But the best one, I think, and most timely, there's a lot of questions out of this youthful generation about socialism and whether capitalism is better and what produces better results and all those things. And now with oil prices going up, people are asking those questions even more. So, I'm just gonna read this question aloud. And then we'll just bat it around. And Bob, we appreciate you joining us to be a part of it. This one comes from Jo. She said, if America has so much oil that we are selling it to other countries, why do Americans have to endure even a temporary increase in gas prices? Isn't that, in essence, price gouging? I have no problem with billionaires making money, but if they are simply getting all they can off the backs of hardworking Americans using the excuse of the Iranian war, that seems to play into the leftist accusations against capitalism and thus undermines the MAGA and biblical admonishments on how a national economy works best. I understand that though capitalism does not eliminate greed, it does help reduce it through supply and demand. But in this case, should someone on the right call out the greed of the American oil companies, would that help show the other side that we on the right are against unnecessary gas price hikes too? Would this be a step toward real dialog with the reasonable Democrats? She put that in quotes, by the way, guys, because I'm not sure any of those exist anymore, that we are fighting for the everyday American worker as well. All right, guys. A lot packed in there, right? I mean, just the basic understanding of why gas prices go up and regardless of our level of supply here, it's a world economy, I guess, maybe start there, Bob, like why would gas prices be going up if we're energy independent and we don't run our oil through the Straits?

Bob McEwen [00:02:44] Well, very simply, you have to understand what causes a price. The price is what a willing buyer is willing to pay to a willing seller. And it doesn't have to do with an oil company or you and me or somebody else. It has to do the marketplace deciding. So if the whole world wants corn and there's a wipeout of corn in Ukraine, which is a major supplier of corn, that means there's the shortage. That means the price of corn would go up. You say, why would the price go up? Because the entire world wants more corn. You say yes, but we have plenty of corn in Iowa. Why would our price go? Because the number of people who wish to purchase corn is greater than the supply, which drives up the price. Why does that happen? Because then that is a signal that you need to produce more corn, as you make more money than you produce more. That's how prices work. Now let's take corn away and use oil. That is that the world needs oil and if there's a shutoff of 20% of the source of oil for a while That means that the world is grasping for it, and it drives up the price. Well, but yes, but in Texas, I already have, that doesn't have anything to do with it. It has to do the value of the price, which is the cross between a willing buyer and a willing seller.

Rick Green [00:03:57] This is why Bob McEwen is the phone a friend on all economic questions Who would have thought to use corn as the analogy here and Iowa having all corn. That's perfect, Bob That's exactly the right way to think about it. David? Tim?

David Barton [00:04:10] What I'm hearing is it doesn't matter that it's produced locally. It's sold all over the world. And so, our price, the demand is so high across the world that what's produced in America brings in a lot more money or the price is higher because the demands high, so I guess it's really, I was thinking in terms of we use our oil here, but it really is our oil has been exported across the world and that's why the price goes up essentially. Is that right?

Bob McEwen [00:04:31] And the important thing is that it's the purchaser that sets the price. It is not the oil company or it's not the farmer. It's the person who wants to buy it. And if the person driving down the road and he sees corn at $4 a year, he's gonna say, I just keep going. And so then they have to put out $3 a year until finally they get people willing to stop and buy it and the price was set not by the seller. It was set by the buyer, by the purchaser. Now let's suppose you have a load of it and 50 people show up and they all want the corn and one of them says well I'll pay 50 cents in here, I'll play a dollar in here I'll bet a dollar and a quarter in here and the purchasers sets the price because he is the willing purchaser so the idea of attacking the oil company for this price. If it was up to them, they set the price at- $500 a barrel, but they can't set the price, they look at every day to see what the price is because that's what the world market is saying I'm willing to pay for.

Tim Barton [00:05:28] But Bob wouldn't it just be easier if the government stepped in and just put a price cap on it and said look, we’re not gonna let you sell but you shouldn't have to pay more than three dollars per gallon of gas? So, what couldn't the government just step in and solve this problem, Bob? It's I mean Mamdani up in New York City. This is like this was his idea Let the government solve the economic problem, Bob. Why wouldn't we just get the government to solve this problem?

Bob McEwen [00:05:57]  Tim, that's exactly the question. It's only been through time immemorial. That is what socialism people who run for office, if you will vote for me, I will then set the price. So, you take Venezuela, third richest nation in the Western Hemisphere, same population as Canada, a very, very wealthy nation, and that's when bad things happen, when things are really going well. That's when somebody comes along and says, how about if I lower the price? I'll just set a price that you can get it for free. We don't want those dirty oil companies making those money. We'll take it. And so they do take it, but in order for the oil to be produced, for it to pumped, for it to be refined, for to be shipped, there has to be reach a certain value and it's not it doesn't before they can make a profit and the profit is usually in the neighborhood of three to four to seven percent somewhere in there. If it's on food by the way, not as an aside, if it's at a grocery store it's less than two percent. And manufacturing is four to seven percent. So if they're going to make a four to seven percent profit, and the dictator comes along and says, I'm going to cut it in half. We're going make it so that it only costs half as much. What does that mean? That means that they sell it for less than it costs to produce it. And what is the consequence of that? The nation, such as Cuba, that was a major exporter of sugar to the entire world, ran out of sugar immediately. Ran out of chicken immediately. The shelves are empty immediately. That's what socialism does because what government can't set the price only the purchaser only the willing buyer can set the price and when a politician steps in there rest assured is going to foul up big time. It only works that way every time

Rick Green [00:07:38] Yeah. And, and Bob hit this thing about price gouging. I've always wondered what, how do you gouge if nobody's willing to buy it or, you know, you're not willing to sell it. I mean, even if, if, if the prices are going way up, it must be because people really need that thing and there's only so much of it. So, so where did this come from? This whole idea of you're gouging because the market needs your product bad enough and it costs you that much to put it out there and still make a profit.

Bob McEwen [00:08:05] Well, Rick, let me just throw in an aside here, and that is, if you grew up on a farm, you don't have a problem with this question. You understand what it takes to purchase the grain, to put in the fertilizer, and wait for the production of the cost, and you know how much it costs for each grain, each bushel of corn, how much a cost to raise a hog and all that, and Thomas Jefferson was very, very concerned when all the farmers moved to the city, and they don't know how this thing happens, then they'll make these crazy statements. So let's take the one that you just said about gouging, and let's don't use oil, let's use shoes. Let us suppose that you're in the shoe business and you sell you buy shoes at $90 a piece and you sell them for $100 so you make $10 on those shoes and suddenly you get an order because of inflation and we can explain where that comes at another time but when inflation comes along and the price jumps not to $90 they tell you from now on your shoes are going to cost $120. Now what do you have to do? You say, well you only paid $90 for those shoes on the shell. Why would you up the price? You're going to make a profit at $10 if you sell them at $100. No, no, no, no. You have to increase the price of every one of those pairs of shoes to $130. Why? Because every time you sell one, you're going to need $120 of those dollars to go back and replace it on the shell. And if you don't make it on this shell, then you'll be out of business. So let me just say it again, you were buying it at 90, selling it at 100, when the price jumps to 120, you have to sell it at 130 immediately. Now in this interim period, Rick, anybody can come along and say look at that he bought those shoes at $90 and he's selling them for a hundred and thirty dollars that means he's making a 40% profit while he's price gouging, he's.... No, he's not price gouging at all if he doesn't sell it at that new price he'll be out of business. Now, let's don't talk about shoes let's talk about oil, and so if you're buying oil at $60 a barrel and it jumps to $100 a barrel, that means that you have to process and sell it enough to replace each one of those barrels at $100 dollars a barrel. And during that interim period, and you're a leftist, and I can show you in the 1970s, where the members of Congress, such as people that you and I would respect, theoretically, and they're screaming at the oil companies, you're making these 30 and 40% profit. They're not making 30 or 40 percent. The price of oil has gone up so high that they had to get that in order to survive. But if you've never grown up on a farm, if you never raised a hog in 4H, you don't know how this works, you're subject to that kind of demagoguery, as we've just described.

David Barton [00:10:39] Bob, I've got a question for you. This, this is something I've never fully figured out. So since we're getting our PhD in economics today, listening to you

Bob McEwen [00:10:47] That's right.

David Barton [00:10:49] Tell me how futures plays into this, because futures, what is futures? They're selling on speculation. Does that affect prices? What happens with oil futures or corn futures or anything else?

Bob McEwen [00:10:59] Well, futures are a person that comes along and he says, I think that price of oil is going to be $130 a barrel. And so therefore, I'm going to offer to purchase it at $120 because I think it's going to go higher than that. And so, I'll sign a contract, a future contract, that I will buy it in three months at$ 120 a barrel if someone will sell it to me. And so, people watch that market because these are experts, is what are they speculating? Are they speculated it's gonna go up? Are they speculative that it's going to go down? And it gets back, David, to the people, the people that are in business. We have to love those people. The nations that honor those people prosper. Those that ridicule them and abuse them and carry little signs around like they do in Seattle and Portland saying, tax the billionaires. You saw where the mayor of Seattle the other day, here they are, they're driving out Boeing. Now, can you imagine that the finest company in the aircraft in the world, and they're bragging about how she's driving out Boeing and then driving out Starbucks, founded there in Seattle. And she goes, bye-bye. She has no comprehension of what happens when those businesses get up and leave. Now, people that are in business that try to eke out those three to 5% profits. Have to make these gambles these risks with their own money they go in the futures market and they say in order to stabilize this thing I’m going to take this risk, now not if not very many people do that. But nevertheless, one of the ways that you can take an analysis of what do you think is going to happen you look at the smartest people in a particular business whether being corn or oil or gas or whatever. And say what are they speculating? What are the future market? What are they willing to pay at that rate? And what it does, David, is that it smooths out the bumps because they're already committed and they can do their balance sheet. This is what we're going to get it at. Now of course if the price goes down and they pledge to pay higher than they pay a price and that gets me back to where I began. Those that are willing to be engaged in business, we love them because they are the ones that make it all work. Without them, you end up like the rest of the world. 4% of the population of the world call themselves American, and every year they produce a third of all the goods and services on the planet. Why? Because we're smarter than anybody else? Nope. Because we are freer than anybody else. And when these people step into Chicago and step into New York and step into these crazy governors, mayors, they destroy, I just saw where Dell corporation at $3 trillion corporation is leaving Delaware today and going to go to Texas when these stupid, idiotic, leftist, liberal governors and mayors they destroy jobs. And of course, when they do it around the world, we benefit because the richest man in the world is an American, but he happened to be born in Africa. The man that is head of one of the largest corporations in the world at Google is an American, but he was born in India. America is great because it's free, and when these socialist idiots that create poverty in Cuba, in Venezuela, in elsewhere, when we elect them to office and 83% of immigrants in New York voted for this new mayor who is from Africa, when these people come to our country and don't understand what made America different and try to make America like their country, it does damage to us all.

Rick Green [00:14:23] Yeah, we basically import horrible policies. Bob, what would you say? I love Ben Shapiro's new book, Lions and Scavengers. I mean, that's really what you're talking about is the scavengers essentially just berating the lions until they say, forget it, I'm done. I'm either moving somewhere else or I'm not going to build that thing anymore because you've made it so not only expensive to do it, but the headaches that, that you create and you make the rewards so far, you know, so, so much less appealing because of all of the pain that it requires to get there. Do you think there, I mean, what, what hope line can you throw to the entrepreneurs out there and the people that want to still be in a free economy and have these things? Do they, do, they need to move to a state that's more free, do the need to just keep fighting for, you know, better regulation and or less regulation and better policies. And then I mean Trump is obviously trying to turn this thing around, but people do get frustrated. What do you say to them about staying the course and staying in the fight?

Bob McEwen [00:15:14] Well, that is the genius of our founders in creating the federal system. So that when you elect, you take a state like California, there's just nothing that you can say about that state that isn't ideal. It's wonderful. It has timber. It has gold. It has mountains. It has everything one would want. And you would think, how can anybody screw this up? Well, rest assured, they can. And so, they begin to reward people for not working and they penalize people for every job. And they had 60 refineries that have empowered the entire world. Now they're down to six oil refineries and four of those are closing. And, and major, major firms such as Valerie, such as Tesla. They drive it out of their state. So fortunately we have this federal system of where not everybody is stupid at the same time. And so, you have places like Texas and like Tennessee and like Florida where people move in order to show prosperity. The four largest states in the union are New York, California, Texas and Florida. And of those four, two of them are red and prospering and growing and happy and two of are blue and collapsing and criminal and diminishing. So once you understand the principle, you can do it, but it's our responsibility to educate our children and each other to make sure that we don't do the.... DeSantis is the governor of Florida that has just made that state a rocket ship. Now it's the third largest state in the Union, but he only won by 30,000 votes. Had he had 15,000 people shifted otherwise, the crazy man that was running against him, the former mayor of Tallahassee, eventually was found with a dead boyfriend in the hotel in Miami, if that man had been the governor instead of DeSantis, and he made all the regulations that you had to have toilet paper strapped to your face in order to walk down the street, and all the things that went along with it like they had out in California. Then Florida would have been just like California and Oregon the beautiful Portland, beautiful Seattle are now two of the five most dangerous cities in the United States. The leftists can destroy anything But fortunately periodically we elect good people like we see in in our red states and we can make the difference

Rick Green [00:17:29] Alright guys, we gotta take a quick break our special guest today, Congressman Bob McEwan with us. Stay with us you're listening to the WallBuilders Show.

[00:18:27] Welcome back to The WallBuilders Show. Thanks for staying with us. Thrilled to have former Congressman Bob McEwen from Ohio with us and just basically getting a full-blown economics lesson today. By the way, you can learn more from Bob, Politics Easy as Pie, available at WallBuilders and also go through our Biblical Citizenship class where Bob and Charlie Kirk and others sit around and talk about a lot of these questions we're talking about now.

Tim Barton [00:19:02] You know guys one of the questions we've actually had a couple listeners write in about this and Bob is the perfect guy to answer this because all of us have opinions and largely founded on constitutional principles, but Bob let me throw this to you. So, that there are questions where people are curious What is the proper role of government? Because on some on some issues you see that the government has upheld some regulations that have made it seems like some industries more safe. But then where's the balance of, if the government gets involved and starts doing regulations, do we want government to do any regulations or all the regulations? Where is the balance that the government can offer safety to individuals without micromanaging the companies? What should we think about or how should we view the proper role of government when it comes to business and economics?

Bob McEwen [00:19:53] Well, Tim, that's an excellent, excellent question because that goes to the heart of what politics is. And that is that basically we believe that government is, as Abraham Lincoln said, government should do only those things which a man cannot do better for himself. And in government is essential for freedom. If we didn't have government, you and I couldn't be sitting here doing this, we'd have to be home protecting our property. There are third world countries where that's where they function. They have to have people to protect their properties in Congo and elsewhere. It's not because of natural resources or good climate. Congo has that. But it doesn't have a spiritual value system of right and wrong. Therefore, it has abject poverty. And so, what people can join together in doing things that the individual cannot do, and that's where the margin comes. And it's the desire of people that are not successful in business. To get power by getting elected to office and then they can tell people what to do and the purpose of government in America is to be the servant. I, as a member of congress, I never signed my name congressman my predecessor showed me in the Constitution there's no reference to congress, it says representative to congress. And I, it's not my office or my district, it's their office and their district and I am their representative. Now if a person sees themselves in government as to represent the people, then they'll do what is collectively good for all of them. But if they think that they're the ones that can decide when people can drive and when they can turn right on red and they put signs everywhere just because they have the capacity to do it, that's where you lose their freedom. And it's the natural tendency of all people, Woodrow Wilson said, the natural tendency of government to constantly expand and to grow. And so, when people are there, they see themselves as the lord over other folks, then you can just listen to them. It doesn't take long Tim. Listen to their speeches and this and that, and you listen to AOC and Mamdani and all these folks, and they're telling what you should do and what I'm going to do, and they never talk about the people representing their interests and their sites. So, your question is, at what degree there are things that we cannot do for ourselves, such as maintain a solid currency? And we can collectively band together to have a currency that's solid, that makes for commerce. If they want to make a canal from Lake Erie to New York, and we can drill the Erie Canal, people can band together. But even in that case, all you need is the authority, because individuals invested to do it. And that's the difference between America and the rest of the world, is that we allow the climate, the environment, we don't tell you what kind of car to make or how to make it. We just tell you the environment in which you can make it and from that all the great inventions of the world come from America

Tim Barton [00:22:45] So Bob, what would you then say to clarify of some of the regulations, because some regulations, it does seem that somebody had a good heart, well intentioned like to say, we're not gonna let you hire 12 year old children to come work your assembly line, versus when you then have the government start micromanaging on things that are excessive and hindering people that are trying to be creators, job creators and product creators, et cetera. Where do you see the balance when it comes to regulations?

Bob McEwen [00:23:17] Well, as I said, I don't have a perfect answer for that because that's a constant competition. And where you draw that line is whether you go through more government. And what we learned is that as you get to more government, the tendency to do that, you then create poverty because you limit the decisions of individuals. And when individuals in the marketplace are making them, then they collectively make it for their best interest, the degree to which you reduce those decision makers to finally you have a dictator. And you just stop and stop and think when somebody else is buying a dress for your wife, when somebody else is buy a jacket for you as you can't do it for yourself, they simply cannot do it as well as we can individually. So that's the fight is that there are those who believe that government should make decisions for us and you and I believe the marketplace individually, we should make those decisions.

Tim Barton [00:24:03] And Bob, then I think, too, maybe to put a bow on this, it seems in everything you're saying with freedom. And you say this in your teaching Politics: Easy as Pie, but it echoes the sentiment of the Founding Fathers that without religion and morality, freedom doesn't really work. And I think it's true in economics too, that when we talk about, we don't want the government to micromanage and make decisions for us, but when you remove a moral and ethical system, it creates a space and opportunity where people feel like the government needs to come solve this problem, but a lot of the problems they might be trying to solve are a reflection of a lack of moral values being upheld in economics. Would you agree with that or do you see it different? 

Bob McEwen [00:24:42] That’s only 100 percent correct. That's the truth. That's the absolute case. And my wife has a has a Facebook friend who's a big leftist. And I just saw yesterday that one of the things he had, we hold these truths on these were out and it says we hold our truth and that now there it is That's the same as Adam and Eve in the garden. That's a fight. Our truth, I am God. I shall ascend into the throne. I shall be like the Most High. I see that it makes one wise, be like God, knowing good and evil. I should, our truth, as opposed to our founders who understood, our truth will end up killing people. Man without God always ends up killing. And so that's why the Jefferson Memorial says God, who gave us life, gave us liberty at the same time. So, you see the sequence. Without God, there's no protection for life. There's no protection for life; there's no protection for liberty. And we've seen our opposite political party when they took away God out of the platform and somebody on the floor said this is the first time, we've done that we should make some reference to God. And they booed and hissed and screamed and carried on for the last 30 some years. They've never made a reference to God and so we saw Kamala running for office with all the turmoil at the border in Ukraine and elsewhere. And yet literally a third at least of every single speech. I challenge you to find a single address she gave her presidential campaign in which she didn't spend at least a third of it talking about the joy and the privilege of taking innocent life, focusing on taking innocent lives. And without God, there's no protection for life, and then your liberty is severely at stake. 

Rick Green [00:26:21] Well, if there's any question of whether or not I learned anything today, let me close by saying Representative Bob McEwen, thank you for joining us. All these years of having you on, I never knew that. Now I'm going to call you representative, not congressman from now on. Hey, appreciate you so much, brother. Thank you to everybody that was listening today. Be sure to visit our websites today, wallbuilders.com and wallbuilders.show. You've been listening to The WallBuilders Show.