Gas prices are hig and many are being blamed other than the oil companies, especially by republicans.
As the world reels from record high fuel prices, everyone is looking for scapegoats. Common theories include: It’s because President Joe Biden is caving to the climate alarmists and killing the oil industry by canceling drilling leases and ordering layers of needless regulations, It’s the greedy oil companies — already the richest on the planet — that are driving prices higher by cutting production, t’s the pandemic, It’s Putin’s war on Ukraine and It’s the Atlanta Falcons and Nick Saban! (OK, no one is saying that — yet). Well, after searching the business and industry press, I discovered some of those are accurate. But not for the reasons you may think. And best of all, some provide a glimmer of good news for the planet — and especially coastal Louisiana.
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The main thing to remember is that most prices are controlled by two things, supply and demand.
As in any product used across the world, the price you pay at the pump is determined by supply vs demand. When demand soars past supply, suppliers charge more because they can. It’s business. No product is more susceptible to world demand than energy. Oil and gas companies ride the roller coaster of economy-impacting world events, cutting production when things look grim, drilling like crazy when the arrows point up. Oil states like Louisiana know this well, living through constant boom-and-bust cycles for almost 80 years. So, when the pandemic sent the world into a great recession, oil companies found themselves sitting on massive supplies and drilling capacity built for a red-hot market, but very few buyers. That’s why oil prices went into negative territory for a short time. There was so little demand that oil producers were paying companies to store their products! The industry crashed, losing billions. Eventually, the pandemic slowed and economies started coming back, boosting demand and prices. But as demand has grown, production has not, and prices have soared to new records.
We are outraged as we produce more oil and gas than any other country so why?
Americans are outraged about the high prices at the pump because the United States is now the world’s largest producer of oil and gas, followed by Saudi Arabia and Russia. It is also the third-largest exporter behind those two countries (And, by the way, we became the world’s energy titan even with decades of increased regulations on drilling, production and use of oil and gas.) Finally, the U.S. is also the world’s second-largest importer of oil because many of its refineries are built to process only types of oil mined from other countries. Naturally, Americans want the industry to increase production so prices can fall. Indeed, Biden has begged American companies to increase production and capacity to ease the burden on consumers. They have refused. Why?
From their perspective, we are making profits so why change now!
Yes, they are enjoying record profits and rewarding stockholders. But, according to the financial press, there is a second, equally important reason. Which brings us to the hopeful part of this story. Even before the pandemic, the industry had decided the future for fossil fuels was not great because the growing impact of climate change was increasing demand for renewable fuels. They see this pattern in the record sales of electric vehicles and the decision by American carmakers to go almost fully electric in 10 years. They see it in record growth worldwide in investments in solar and offshore wind development. Meanwhile, Putin’s murderous war, while pushing prices higher right now, is speeding the transition away from fossil fuels. European countries are advancing their timelines to renewable energy so they can stop buying Russian oil and gas. Oil and gas executives know ramping up production and drilling now will cost many billions over several years that could leave them sitting on product as demand begins slipping — just like during the pandemic. So they’re choosing to squeeze as much profit out of the world’s misery while bankrolling for their futures in renewables. It’s business.
Governments can work to mitigate the pain.
Of course, governments can ease the pain. The U.K. is using a windfall profits tax on oil companies to ease the bills on low-income households. Don’t expect that to happen in the U.S.; Republicans would block any such attempt in the Senate. A better way to look at these record prices is as a signal that better days are coming for the planet, and Louisiana. Higher prices will mean less fossil fuel use and reduced emissions, which eventually will reduce sea level rise and the size of hurricanes. In the long run, that’s good news.
So we pay more knowing there is a light at the end of the tunnel. That is a tough pill to swallow at $5.00 per gallon!
