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Gas Prices Are Insane: Why Isn’t America Pumping More Oil?

Gas Prices
A U.S. postal worker puts his seatbelt on after filing up his vehicle at a gas station in Garden Grove, California, U.S., March 29, 2022. REUTERS/Mike Blake/File Photo/File Photo

Gas Prices Are Sky High – Why Isn’t the US Increasing Oil Output? While the price of oil settled below $100 per barrel on Tuesday – the lowest level in a fortnight – sanctions against Russia and turmoil in eastern Europe mean the oil market is still plagued with uncertainty

With the rising cost of fuel at the gas pump in the United States and Europe, and the cost of many consumer goods and food increasing due to issues with the oil supply chain, many are left wondering why U.S. oil companies aren’t increasing domestic oil production.  

After several failed attempts at encouraging OPEC countries to increase oil production, President Joe Biden could theoretically do more to increase the supply of domestic oil – but for one reason or another, it has yet to happen.

In fact, U.S. oil production just dipped, which seems rather strange. What’s stopping U.S. oil companies from producing more oil?

Oil and Gas Executives Say No

The price of oil surpassing $100 in March this year should, in theory, have been a good incentive for U.S. oil companies to buy new land, drill new wells, and increase production. However, a survey released by the Federal Reserve Bank of Dallas showed how many U.S. oil companies were not motivated by price. The survey found that 29% of oil executives didn’t consider the price of oil a motivating factor to enter growth mode. 

40% of respondents to the survey also said that oil prices exceeding $120 per barrel would be sufficient for U.S. shale oil producers to enter growth mode. Prices did temporarily surge above $130 per barrel in March of this year but have remained around the $100 mark since.

Costs also increased for gas and oil companies in the United States, with the index for input costs increasing from 69.8 to 77.1 and hitting a new record high. Exploration and production firms also reported an increase in the index for input costs from 44.9 in the fourth quarter of last year to 56 in the first quarter of this year. The cost index for lease operating expenses also rose from 42 to 58.9, also a record high. 

Barriers to Entry

Costs have proven a barrier to entry for many U.S. oil producers. While shale oil producers in the United States have the functional capacity to increase oil production relatively quickly, the higher input costs, additional labor, and the equipment required to get the operations moving are a deterrent. 

Clark Williams-Derry, an analyst from the Institute for Energy Economics and Financial Analysis, told Marketplace that there is “no switch that anyone can flip to suddenly turn on oil production overnight.”

“There is probably going to be six-to-nine months’ lag between today’s high prices and the time when the oil industry can bring significant amounts of new production online,” he said.

A combination of a lag between ramping up oil production and putting in place the logistics to transport the oil, as well as the uncertainty of sustained high prices, means that U.S. oil execs appear less interested than they otherwise would be in producing oil.

For U.S. oil production to increase, prices would likely need to be higher for longer.

Jack Buckby is a British author, counter-extremism researcher, and journalist based in New York. Reporting on the U.K., Europe, and the U.S., he works to analyze and understand left-wing and right-wing radicalization, and reports on Western governments’ approaches to the pressing issues of today. His books and research papers explore these themes and propose pragmatic solutions to our increasingly polarized society.

Written By

Jack Buckby is 19FortyFive's Breaking News Editor. He is a British author, counter-extremism researcher, and journalist based in New York. Reporting on the U.K., Europe, and the U.S., he works to analyze and understand left-wing and right-wing radicalization, and reports on Western governments’ approaches to the pressing issues of today. His books and research papers explore these themes and propose pragmatic solutions to our increasingly polarized society.

4 Comments

4 Comments

  1. Illurion

    May 12, 2022 at 10:20 am

    The answer is simple.

    The 2020 election was corrupted, and became a coup, and even though President Donald Trump won the election and was re-elected, the coup plotters nonethless swore Biden into office as president.

    On 11/3/2020, the government of the USA was overthrown.

    Biden is brain dead and not making the decisions.

    Those “shadow individuals” that ARE making the decisions ARE DEDICATED TO DESTROYING THE USA.

    What they have done with gasoline, they are doing with practically everything.

    Whether the USA survives or not, depends on whether this upcoming November 2022 election is also corrupted.

    • John

      May 12, 2022 at 12:46 pm

      Yea he playing game prices,war game

      I see everybody. Mad him Biden. Fjb Back trump 2024 fix prices,war peace

    • Jack Mayhoff

      May 12, 2022 at 6:34 pm

      You are DEAD right about this. Bearded men pretending to be women now in charge of our nations health, men pretending to be woman now allowed to compete against women, PREGNANT women now being prepared to serve as soldiers, taking from the productive and law abiding in order to give to the profanely degenerate and criminal minded… It goes on and on. The ship of state is rudderless. The country will not MAKE it to the end of Obidens’s full term. Never thought I’d ever see such insanity over take my country. CIA, DOJ, FBI now being used as weapons AGAINST us alongside the corrupt media… Dire. Very dire.

  2. Eric

    May 13, 2022 at 1:50 pm

    Oil companies everywhere are acting like the cartels that they are; gouging us all to increase their profit margin. The best possible solution for consumers is to invest in energy efficient vehicles, and where possible, electric vehicles that can be charged from solar, wind, nuclear, or off-peak electricity.

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