What Is the Real Reason for High Gas Prices?

Tim Healey
by Tim Healey
what is the real reason for high gas prices

When gas prices spike, we argue.

It’s the current president’s fault. It’s the previous president’s fault. It’s about the Russian invasion of Ukraine, and on and on.

Now Yahoo! Finance columnist Rick Newman suggests that politics and war aren’t the problems, but simple economics are.

Newman says that while sanctions against Russian oil play a part, oil companies are reluctant to produce more oil because if they overproduce, they’ll see their profits sink.

He points to an oversupply situation that existed from 2015 to 2020, and how profits cratered during that time, before the coronavirus pandemic made the situation even worse.

There have been some calls for the Biden administration to allow for more drilling, but Newman cites a policy expert who says that it won’t matter: “The amount of oil and gas leasing the Biden administration has done makes absolutely no difference in the amount of oil and gas we’re producing right now,” said Samantha Gross, director of the energy security and climate initiative at the Brookings Institution. “These things take a while. The industry tends to have a backlog they’re figuring out what to do with.”

Newman also notes that the Biden admin has been criticized by environmentalists for allowing too much drilling, and that most drilling takes place on private land — meaning there’s no need for federal permits anyway.

I’m not defending or critiquing the admin here, nor am I evaluating Newman’s claims. While I/we do that sometimes here, I am not well-versed in the oil market enough to really know if he’s correct or not. But I did find the piece intriguing as a possible explainer for what’s happening with fuel prices.

I’m also a fan of Occam’s Razor — the simplest explanation is the most likely. It seems to me that for all the hullabaloo about fuel prices, it’s likely that simple business realities, and not political decisions, are the cause of high prices at the pump.

Newman may or may not be right, but it’s food for thought.

[Image: Shutterstock.com/ALPA PROD]

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  • Slap Slap on Mar 23, 2022

    I live in the DC area. The Trucker's Convoy people are upset that so many drivers are giving them the finger and telling them to go F themselves. I was out on the Beltway two weeks ago - I saw just 6 pickup trucks flying flags. I was out there again today and saw none.

    • See 1 previous
    • Art Vandelay Art Vandelay on Mar 24, 2022

      @teddyc73 wrong spot

  • FreedMike FreedMike on Mar 24, 2022

    By the way, in case anyone's still wondering why more oil production isn't happening, here's some data based on a survey done by the Dallas Fed of actual oil producers: https://www.dallasfed.org/research/surveys/des/2022/~/media/Images/research/surveys/des/2022/2201/des2201c5.png Almost 60% of them said that the key factor was pressure from their own investors and shareholders to keep oil prices high. No one's constraining their production - they're doing it on their own.

  • Inside Looking Out "And safety was enhanced generally via new reversing lamps and turn signals fitted as standard equipment."Did not get it, turn signals were optional in 1954?
  • Lorenzo As long as Grenadier is just a name, and it doesn't actually grenade like Chrysler UltraDrive transmissions. Still, how big is the market for grossly overpriced vehicles? A name like INEOS doesn't have the snobbobile cachet yet. The bulk of the auto market is people who need a reliable, economical car to get to work, and they're not going to pay these prices.
  • Lorenzo They may as well put a conventional key ignition in a steel box with a padlock. Anything electronic is more likely to lock out the owner than someone trying to steal the car.
  • Lorenzo Another misleading article. If they're giving away Chargers, people can drive that when they need longer range, and leave the EV for grocery runs and zipping around town. But they're not giving away Chargers, thy're giving away chargers. What a letdown. What good are chargers in California or Nashville when the power goes out?
  • Luke42 I'm only buying EVs from here on out (when I have the option), so whoever backs off on their EV plans loses a shot at my business.